Electric carmaker Tesla’s output slowed down during a rocky start to the new year, a development that will likely magnify nagging doubts about whether the electric car pioneer will be able to make the mass-market leap.
The Palo Alto, California, company churned out 77,100 vehicles from January to March, well behind the pace it must sustain to fulfill the CEO Elon Musk’s pledge to manufacture 500,000 cars annually.
The first-quarter production figures announced late Wednesday lagged the 86,555 vehicles that Tesla manufactured during the final three months of last year when the company was scrambling to make more cars.
That push helped Tesla post a profit in back-to-back quarters for the first time in its 15-year history.
But Muskhad warned investors that the company would lose money during the first quarter of 2019.
Tesla was forced to cut costs to lower the price of its Model 3, its first electric car designed for the mass market. And Musk said the company encountered “many unexpected challenges” when Model 3s came through the Belgian port of Zeebrugge in early February.
Musk has acknowledged that Tesla’s hopes of becoming a consistent moneymaker are riding on the success of the Model 3 and a sports utility vehicle called the Model Y scheduled to be released next year.
For those vehicles to become hits, Tesla will have to be able to produce them in high volumes at its factories in California and China.
The lower-than-expected delivery numbers and “pricing adjustments” will take a bite out of Tesla’s first-quarter net income, it said. But it said it ended the quarter with sufficient cash on hand. Tesla said it still expects to deliver between 360,000 and 400,000 vehicles this year. The company didn’t provide further details on how it fared financially during the first quarter. Its quarterly results are expected to be released late this month or in early May.
The disappointing production figures are coming out amid more uncertainty for a company that seems to be caught in an endless cycle of turmoil.
Although the arrival of the Model 3 in Norway led to a surge in market share for Tesla in that country, in the US, Musk is fighting a protracted legal battle with US stock market regulators.
The Securities and Exchange Commission is accusing Musk of improperly tweeting about Tesla’s manufacturing volume in February when he predicted that the company would make about 500,000 cars this year. A few hours later, he backtracked slightly, saying he meant Tesla would be manufacturing about 125,000 cars a quarter by the end of this year, a pace that would translate into 500,000 vehicles annually.
Either way, the SEC alleges Musk’s tweet violated a court-approved settlement that called for him to have his tweets about Tesla information pre-approved by the company. That requirement is part of a $40m settlement reached last year after Musk tweeted he lined up the financing needed to lead a buyout of a Tesla, a claim that the SEC asserted was a misleading statement that duped investors.
Musk has vehemently denied his February tweet violated the settlement and is fighting the SEC’s attempt to have him held in contempt of court. The US district Judge Alison Nathan is scheduled to hear further arguments about the case during a hearing scheduled Thursday in New York.
In March, it was also revealed in March that Musk’s security clearance, which he needs for his company SpaceX, is also under review by the Pentagon, after the billionaire smoked marijuana on a live-streamed podcast in September.
The company has laid off some workers, including about half of the team hired to deliver cars in the United States, and said it would close stores to lower costs. It has since said it would keep higher-volume stores open, while announcing a 3% price increase on some models.